Redeeming sins of past profligacy

Source: Mr G M Mangion¸ PKF Malta 

As published on the Sunday Independent¸ 8th September 2013



Edward Scicluna¸ a Toronto trained university professor and experienced economist has been busy discussing his pre- budget document with the MCESD and  civil society groups¸ representatives of non-governmental organizations¸ businesses and unions with a slogan that the 2014 budget will hold no surprises.  Prof. Scicluna noted that economic growth – which amounted to 1% in real terms last year – is projected to increase to 1.4% this year and to 1.6% the next. Such modest growth will be spurred by a recovery in private consumption¸ which¸ he said¸ had slowed down ahead of the general election. Domestic sales and retail business has reported brisk results this summer which may augur well together with a higher return expected from record breaking tourist arrivals. Still being prudent the government is projecting a deficit amounting to 2.7% of the GDP – down from 3.3% last year- a prediction that the EU Commission and IMF is seeing as being too ambitious.

The Ministry revised upwards the 2013 national deficit forecast  by 1 percentage point – from the previous administration’s 1.7% deficit forecast – to 2.7% .Realistically this was a reflection of  fiscal slippage which continued in the first quarter of this year which partly resulted from the stretched and consequently wasteful  2013 pre- election period .As a matter of fact since the previous election of 2008 the deficit was estimated at €265.4 million¸ more than double the deficit of €118.9 million registered in previous year . In 2008¸ this was meant to be kept under wraps and not exceed 3% but due to recession deficit exploded to reach 4.7 per cent of GDP¸ compared to 2.2 per cent of GDP for 2007. This poor economic performance caused the consolidated debt  to reach €3¸626.2 million¸ or 63.8 per cent of GDP in 2008 (  profligacy lead to the debt increase to €5 billion in 2013 net of proceeds from selling most of the family silver ).Naturally being new to the job and having inherited a higher deficit  than actually forecasted for 2013 the finance minister is cautious not to promise too much in his first budget so as not to fall in the temptation of the precedent government which went overboard with promises resulting in fiscal slippage now with hindsight blamed on the pre-election euphoria. The learned professor is even hinting that “dead wood” in the public sector has to be removed as the Government moves to trim unnecessary expenditure. He wants to simplify processes and working practices to maximise efficiency¸ effectiveness and reap better economies of resources employed in the government. Already the slogan of a spending review is being whispered through the dark corridors of Castille. The minister reiterated that the Auditor General will be tasked to analyse the Government’s budgetary projections but more important he wishes to create a fiscal council coupled with a Special Review Unit. The question is who will be the henchman who will be brave enough to battle against entrenched bureaucracy with its long tentacles deeply rooted in the system? Time will tell whether Prof Scicluna will succeed to reduce red tape commonly referred to as the Hydra and Medusa monster but help is at hand as recently as Simplification Commiss